CRA Rating Analysis Outcomes:
ASSUMPTIONS OF FUTURE TOWN ECONOMIC DEVELOPMENT ACCORDING CRA RATING ANALYSIS OUTCOMES:
We have taken in consideration ability and willingness of the Turcianske Teplice Town to repay fully and on schedule all its financial credits. We have taken in account assumed future short-term development of budget management in term of incomes and expenses, planned investments and insolvent estate.
CRA RATING AGENCY, Inc. therefore confirms
short-term CRA RATING level skP-1
to the Turcianske Teplice Town
We have reviewed future possible economic development of the Town. In the following years we expect stable budget management and very qualitative results continuance in operative part of budget. The existence of certain financial back-up would be welcomed in the future for the reason of improving budget stability. We positively access level and structure of indebtedness and depending on it yearly debt service. We have considerated planned investments extent and their financing arrangements. We have taken in account risks resulting from new competence enforcements and overtaken properties. We have taken in consideration the risks resulting from economic development of the town and region as well.
CRA RATING AGENCY, Inc. therefore confirms
long-term CRA RATING level Ba+ / skA+
to the Turcianske Teplice Town
In Bratislava and Prague, December 21 2004
Miroslav Knazko Lubomir Dubecky
Chief Analyst for Slovakia Manager for Slovakia
CRA RATING AGENCY, Inc. CRA RATING AGENCY, Inc.
According to CRA the town economy will be to a great extent influenced by competence transfer from the State to municipalities that is in progress recently but this is the problem in Slovakia in general and it does not influence only the evaluated town. The biggest problem will apparently remain financial covering of transferred competences and technical conditions of overtaken properties. Transferred competences to the Town have not so far caused any problems exceeding matter of common reality. The town budget for 2003 signalizes increase (+12 %) of total income up to 91 million Sk. The reason for relatively low increase is the fact that income increase from state grant decentralization to 37.8 million Sk (2002: 15.3 mil. Sk) is deaden by lowered income from outside sources to 0 (2002: 11.8 mil. Sk). The impact of this development is the change of income structure in which should markedly dominate grant incomes and later on tax incomes.
In 2003 loans and credits are not budgeted. The share of non-tax incomes to total incomes should in spite of their relatively fixed volume (8.6 mil. Sk) fall to 9 %. Other ordinary incomes and property revenues will dominate again in non-tax incomes.
In term of expenses non-investment expenses dominate in 2003. 64.4 mil Sk (70%) fall on non-investment expenses from 91 mil. Sk of the total expenses. Despite notable interyear (2003/2002) regress of capital costs (-27%) they are still very high (27.9 mil. Sk). The reason is that some investment activities which started in 2002 are finished in 2003. Because most of investments are realized through funds or convenient state loans fast speed of investment activities does not pose any bigger danger for the town budget even from long term aspect.
The budget structure of non-investment expenses does not fundamentally differ from the non-investment budget in 2002. Interyearly (2003/2002) the nominal increase (wage expenses +65%, m.p.o. contributions and transfers +61%, other non-investment expenses +40%) is noticeable in all items besides debt service.
In 2003 debt service resulting from existing indebtedness should be 2.6 mil Sk, and the next year it should reach the same amount. Since 2005 it should be 1 mil. Sk. Debt service planned in this manner does not represent any danger for the town providing quality budget management continuance.
The direction of investments will not fundamentally differ from the last year. The biggest individual investment of 2003 will be a rental apartment house construction in Horne Rakovce. The second biggest investment will be a completion of the school in Horne Rakovce. The rest of sum (9 mil. Sk) will be used for construction or reconstruction of the town infrastructure (town communications (roads), sewage system).
According to CRA more investments should be dedicated for the town improvement to become the important Slovak spa center. In this case it does not mean financially demanding investments (construction, reconstruction) but more small investments into improvement of spa character of the town or its systematic presentation. The narrow cooperation and coordination with the Spa management is required for realization all these activities. In long-run term the key goal for Turcianske Teplice should be significant tourism increase. Its successful realization would bring vast synergist effects (new business opportunities, new sources of income for the residents and town, etc.) for the town and neighboring areas.
According to CRA the Town management will be on a good level in the future. Positive development is mainly visible in the continuously very good Town management resulting in an annual operative surplus. We expect its adequate continuity for the future. CRA recommends re-evaluate the relationship between the Town and Technical Service organization. Because the organization provides services for other municipalities is brings the risk that the town funds are used for “outside” residents. The Agency suggests abating these funds or replacing them by aimed benefits for residents in need. In the area of waste management CRA recommends the fee policy re-evaluation for waste deposition in the Horna Stubna dump. The dump should be able to accumulate enough sources minimally for its own renewal i.e. during the endurance of one coffer the dump should produce enough sources for closing and opening of the next one.
The aspiration of the town representatives is to establish the social and culture center of the Upper Turiec region position and reinstate an important central European spa town position.
Big investments mean a necessity of foreign sources drawings followed by clearing of the debts which brings a certain risk. Debt service resulting from existing debts and an adequate continuity of operative budget part form a space for financing new investments through return foreign sources in the future.
According to CRA the Turcianske Teplice Town is able to repay all its recent and future debts fully and on schedule.
We have reviewed future economic development of the Turcianske Teplice Town. In the following years we expect stable budgetary management and very qualitative results in operative budget part. For the reason of higher stability in the future we would welcome the existence of certain financial back-up. We positively access the level and structure of indebtness of the town and debt service depending on it. We have taken in consideration the planned investments extent and their financial arrangement. We have taken in account risks resulting from new competence enforcement and overtaken properties. We have considerated the risks resulting from economic development of the town and region as well.
CRA RATING AGENCY, Inc. therefore confirms a long-term CRA Rating level Ba+/skA+.